Market Roundup
- Trump vows rapid increase in tariffs on Mexico unless illegal immigration ends
- Ex-China c.bank chief says progress at Xi-Trump Japan meet 'difficult'
- China has a rare earths plan ready to go if trade war deepens - Bloomberg
- Darkening U.S. market outlook yet to faze patient Fed
- North Korea executes envoys in a purge after failed summit - S.Korean newspaper
- China May NBS Mfg PMI, 49.4, 49.9 f'cast, 50.1 prev
- Japan Apr Industrial Output Prelim MM SA, 0.6%, 0.2% f'cast, -0.6% prev
- Japan Apr Retail Sales YY, 0.5%, 0.8% f'cast, 1.0% prev
- Japan Apr Unemployment Rate, 2.4%, 2.4% f'cast, 2.5% prev
- UK PM May's Conservative Party faces historically worst election result in Brexit crisis -poll
- U.S.-based equity funds post $22 bln outflows amid trade tensions-Lipper
- Foreign CB US debt holdings -$5.523 bln to $3.463 tln May 29 week
- Treasuries (-)$4.267 bln to $3.055 tln, agencies (-)$1.996 bln to $331.676 bln
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Apr BoE Consumer Credit (GBP), 0.978 bln f'cast, 0.549 bln prev
- (0430 ET/0830 GMT) Great Britain Apr Mortgage Lending (GBP), 3.80 bln f'cast, 4.12 bln prev
- (0430 ET/0830 GMT) Great Britain Apr Mortgage Approvals, 63.250k f'cast, 62.341k prev
- (0800 ET/1200 GMT) Germany May CPI Prelim YY, 1.6% f'cast, 2.0% prev
- (0800 ET/1200 GMT) Germany May HICP Prelim YY, 1.4% f'cast, 2.1% prev
Key Events Ahead
- (0915 ET/1315 GMT) Atlanta Fed's Raphael Bostic to moderate conversation, "Assessing the Global Economy: an Insider's Look" before the Hope Global Forums 2019 Annual Meeting in Atlanta
- (1200 ET/1600 GMT) Federal New York releases text of President John Williams' speech, "Monetary Policy Theory and Practice and the Lower Bound on Interest Rates"
FX Beat
DXY: The dollar index eased from a 1-week peak after data showed U.S. inflation was much weaker than initially thought in the first quarter amid a sharp slowdown in domestic demand, which could pressure on the U.S. central bank to cut interest rates. The greenback against a basket of currencies traded 0.1 percent down at 98.10, having touched a high of 98.28 on Thursday, its highest since May 23. FxWirePro's Hourly Dollar Strength Index stood at 67.86 (Bullish) by 0500 GMT.
EUR/USD: The euro plunged, extending losses for the fifth straight session, weighed by factors including concerns over Italy's rising debt and the prospect of Trump opening up a European front in his trade war. The major is likely to remain on the downside as a Reuters poll indicated the European Central Bank has no prospect of raising interest rates through to the end of 2020 and its next policy move will be to tweak its forward guidance towards more accommodation. The European currency traded 0.05 percent down at 1.1127, having touched a low of 1.1116 on Thursday, its lowest since May 23. FxWirePro's Hourly Euro Strength Index stood at -60.55 (Bearish) by 0500 GMT. Investors’ attention will remain on a series of data from the Eurozone economies, ahead of the U.S. personal consumption expenditure - price index, Chicago Purchasing Managers' index and Michigan consumer sentiment. Immediate resistance is located at 1.1163 (5-DMA), a break above targets 1.1229 (Apr. 30 High). On the downside, support is seen at 1.1106 (May 23 Low), a break below could drag it below 1.1075 (May 18, 2017 Low).
USD/JPY: The dollar slumped to a 4-month low, dragged lower by the new threat of tariffs on Mexico, coupled with downbeat economic data from the United States this month and the long-drawn U.S.-China trade war, supporting bets that the U.S. Federal Reserve could cut interest rates this year. The major was trading 0.6 percent down at 108.93, having hit a low of 108.91, its lowest since Feb. 1. FxWirePro's Hourly Yen Strength Index stood at 151.20 (Highly Bullish) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. personal consumption expenditure - price index, Chicago Purchasing Managers' index and Michigan consumer sentiment. Immediate resistance is located at 109.96 (May 16 High), a break above targets 110.36 (May 23 High). On the downside, support is seen at 108.72 (Feb 1 Low), a break below could take it lower at 108.49 (Jan. 31 Low).
GBP/USD: Sterling steadied after tumbling to a 5-month low below the 1.2600 handle in the prior session on the back of signs that whoever succeeds Prime Minister Theresa May is likely to be a hard Brexit proponent. The major traded 0.05 percent up at 1.2611, having hit a low of 1.2580 on Thursday; it’s lowest since Jan, 3. FxWirePro's Hourly Sterling Strength Index stood at -39.86 (Neutral) 0500 GMT. Investors’ attention will remain on the UK consumer credit data, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2673 (10-DMA). a break above could take it near 1.2747 (May 27 High). On the downside, support is seen at 1.2570 (Dec. 17 Low), a break below targets 1.2529 (Dec. 18 Low). Against the euro, the pound was trading flat at 88.23 pence, having hit a low of 88.50 last week, it’s lowest since Jan. 21.
AUD/USD: The Australian dollar consolidated near a 6-day low as investors unanimously expect the Reserve Bank of Australia to cut its cash rate to an all-time low of 1.25 percent at its monthly meeting on June 4. The Aussie trades 0.05 percent up at 0.6914, having hit a high of 0.6938 on Monday, it’s highest since May 15. FxWirePro's Hourly Aussie Strength Index stood at -32.35 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6881 (May 24 Low), a break below targets 0.6846. On the upside, resistance is located at 0.6946 (May 15 High), a break above could take it near 0.6961 (Apr. 30 High).
NZD/USD: The New Zealand dollar eased, extending losses for the fifth consecutive session, as markets speculate that a cut in rates from the Reserve Bank of Australia would put pressure on the Reserve Bank of New Zealand to ease again. The Kiwi trades 0.05 percent higher at 0.6512, having touched a low of 0.6494 on Thursday, its lowest level May 23. FxWirePro's Hourly Kiwi Strength Index was at -68.83 (Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6546 (May 20 High), a break above could take it near .6591 (May 14 High). On the downside, support is seen at 0.6474 (Oct. 4 Low), a break below could drag it below 0.6442 (Oct. 10 Low).
Equities Recap
Asian shares slumped as investors feared President Donald Trump's move to impose tariffs on Mexico.
MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 0.3 percent
Tokyo's Nikkei eased 1.6 percent to 20,618.87 points, Australia's S&P/ASX 200 index fell 0.05 percent to 6,388.70 points and South Korea's KOSPI rose 0.2 percent to 2,041.77 points.
Shanghai composite index declined 0.1 percent to 2,901.61 points, while CSI 300 index traded 0.2 percent down at 3,634.72 points.
Hong Kong’s Hang Seng traded 0.4 percent lower at 27,000.44 points. Taiwan shares added 1.1 percent to 10,498.49 points
Commodities Recap
Crude oil prices declined by nearly 3 percent and were on track for their biggest monthly fall since November as trade conflicts spread and U.S. crude output returned to record levels. International benchmark Brent crude was trading 2.8 percent lower at $64.55 per barrel by 0456 GMT, having hit a low of $64.42, its highest since March 8. U.S. West Texas Intermediate was trading 0.8 percent down at $55.97 a barrel, after falling as low as $55.64 earlier, its lowest since the Mar. 8.
Gold prices rallied to a 2-week peak and were heading towards their first monthly gain since January as demand for safe haven assets increased after U.S. President Donald Trump vowed to levy tariffs on all Mexican imports, stoking concerns of a global economic slowdown. Spot gold was trading 0.4 percent higher at $1,292.90 per ounce by 0502 GMT, having touched a high of $1,293.02 earlier, its highest since May 16 and has risen about 0.6 percent so far this month and about 0.4 percent over the week. U.S. gold futures rose 0.3% to $1,290.50 an ounce.
Treasuries Recap
The Japanese government bond prices gained across the board, with the five-year JGB yield declining half-a-basis point to minus 0.190 percent and the 10-year yield easing 1 basis point to minus 0.095 percent. The 30-year yield was down 1.5 basis points at 0.465 percent.
The Australian government bonds gained, with the three-year bond contract up 2 ticks at 98.89 - not far from last week's all time high of 98.92. The 10-year contract gained 4.5 ticks to a record peak 98.50.
The New Zealand government bonds gained, sending yields about 6 basis points lower at the long-end of the curve.
The Canadian government bond prices rose across a flatter yield curve. The two-year rose 1 Canadian cent to yield 1.526 percent and the 10-year climbed 22 Canadian cents to yield 1.556 percent. The gap between the 2- and 10-year yields narrowed by 1.8 basis points to a spread of 3 basis points in favor of the longer-dated bond, its smallest gap since August 2007.
